Photography by Claire Griffith

In a new regular column, Chris Losh, formerly editor of the magazines, Wine and Spirit International and Wine International, gives his take on current issues in the global beverage business. This month, the question of over-production in the Australian wine industry grabs his attention.

The funny thing about big industry takeovers is that, even when nobody really has anything definite to say, they still tend to dominate the newswires.

The last fortnight has been full of the minutiae of the Southcorp purchase and rumour and counter-rumour about Allied Domecq. Yet for me, one of the more eyebrow-raising stories has almost slipped under the radar undetected.

Is it just me, or should we all be very worried about the bumper Aussie crop in 2005?

Let's just re-cap. Hardy's recently announced that its total crush had risen by 10% to over 360,000 tonnes. Given that Australia was unable to sell all it produced in 2004, extra volume is hardly good news.

Particularly given that we don't seem to be talking about top quality Margaret River or McLaren Vale fruit here. Oh no. The growth is from "warmer inland regions where production costs are lower and grapes are used to make mass market wines."

Just what the world needs - more cheap Aussie kit-wine! And it's not like anyone is getting a good deal here. The grape price has collapsed, wineries are giving the stuff away and quality is suffering.

With a magnificent example of tortured logic, David Woods at Hardy's says that the good thing about the extra wine is that it has "come in at price points that we know we have markets for" and would "help keep the company competitive".

Certainly he has a point, in as far as it's quite easy to create a market for something if you promote the guts out of it, but whether it's doing your balance sheet any good is another matter.

Not only that, but there are some who believe that the relentless procession of deep discounts is starting to have an effect on the previously enviable reputation of Brand Australia.

Perhaps we shouldn't be surprised that a relentless diet of BOGOFs has had an effect, but some in the industry have told me their market research shows consumers are starting to see Oz as a supplier of budget plonk and are (whisper it) less willing to follow its wines through the price points than they used to be.

Arguably as significant as the effect a bumper vintage will have on Aussie wineries, is the effect it will have on the country's competitors. European supermarkets are not slow to fill their shelves with huge, anonymous brands. With gallons of oversupply and a yen for BOGOFs as a result, it makes the retailers look like they're offering consumers a good deal.

Except, of course, many of the wines are not as good as they used to be and more interesting wines are being forced out. This global oversupply is creating a breed of wine promo-junkies who don't expect to pay the full price for anything, and in the long term it's in nobody's interest.

Oz needs smaller vintages, and it needs them now - for everyone's benefit.